A Guide to Fixed Rate Home Equity Loan

Home equity loan is the loan taken against your property, and can be fixed rate home equity loan, or HELOC, but in both the cases, the term of home equity loan is usually fixed at 10 or 20 years. Home equity is the difference between price that you could sell at your home at, and the mortgage value of your home.

When to Take Fixed Rate Home Equity Loan

There are several circumstances under which home owners take the fixed rate home equity loan. Homeowner could take the fixed rate home equity loan to consolidate the debt, usually the ones with higher rate such as high interest credit cards. Homeowners also take the fixed rate home equity loan to make the down payment for the investment property, or to buy another home. Another reason for taking the fixed rate home equity loan is to use a second mortgage in addition to first on home refinance or purchase.

Advantage of taking a fixed rate home equity loan is that the interest is usually lower than that of the other loan being paid off, and interest on the debt you pay off is tax deductible. Another benefit of taking the fixed rate home equity loan is that sometimes, it is an interest only loan, so that you make lower payment each month as you are only paying off the interest. The amount you can borrow depends on the equity value you have in your home and policies of the lender.

Before taking the fixed rate home equity loan, read the fine print, and always understand all the terms and conditions. Understand about the prepayment penalties, and be aware of the maximum interest rate you can pay. Lenders providing such loans often get the fee at closing or when the loan is paid off early.

There are few sites that can help you understand the truth about loans, ethical practices and borrower’s bill of rights. These sites make your search straightforward, and there are many tools that can help you make the informed choice when looking for the fixed rate home equity loan. Characteristics of fixed rate home equity loan vary depending upon the fees, interest rates, loan amount, repayment conditions and points. Compare different lenders to find out the loan that suits you best. You can also take help of home equity loan comparison chart to make the comparison.

There are certain risks associated with fixed rate home equity loans. If you are not able to refinance or repay your loan, then you might lose your home. If you miss the payment or make the late payment, it can trigger the foreclosure within 60-90 days.